Programmatic And User Growth Bring AOL Revenue Up 7% To $625 Million

AOL reported revenue growth of 7% YoY in the first quarter, for a total of $625 million. Global advertising revenue, which includes AOL's own properties, search and third-party platforms, climbed 12% YoY to $483 million. Read the earnings release.

CEO Tim Armstrong said the company continues to make updates "placing AOL at the center of dramatic shifts we’re seeing" in areas like video, mobile and programmatic.

Programmatic grew 80% in the quarter, and now accounts for 45% of AOL's display revenue. That growth is actually slower than AOL's dynamo Q4, which saw programmatic grow 250%. But over the past year, programmatic has steadily risen to take greater share of revenue.

While many companies associate programmatic with lower pricing, AOL saw global advertising prices rise 10% overall. Compared to Q1 2014, it sold 34% more inventory programmatically on its own properties. Fifty-five percent of legacy ad.com network revenue is traded programmatically.

ONE Platform

AOL officially launched the ONE platform at the end of the first quarter, though many customers had been using it in beta version for some time.

As agencies and brands adopt ONE or parts of its stack, like multitouch attribution, AOL is seeing an increase in licensing fees, a trend it expects to continue.

"Early on in the industry, the point solution game was an OK game for people to play," Armstrong said. "As people get more integrated on the system side, from CRM to multitouch attribution, the ability to have a fully robust ad tech platform – that gives customers flexibility in components and how they use their data – it’s a hard asset to build."

Armstrong sees AOL benefiting as brands and agencies move from point solutions to consolidated tech stacks. "Customers are going to be in a place where they’re not going to have 20 of these systems, but five or so systems," he said "We're trying to position ourselves toward being one of the top three in this area."

Mobile Growing, Monetization Lags

AOL grew its multiplatform uniques 12% in the quarter to 190 million, outpacing growth among the rest of the top five Internet properties. Fewer of those users are on desktop: Monthly average desktop users declined 6% to 107 million.

Mobile monetization, while improving, lags behind usage. "Mobile revenue grew north of 100% for the quarter, but the percentage of mobile inventory showing ads remains low," Armstrong acknowledged. He said the key to unlocking mobile spends will come from cross-screen and multiscreen targeting, new ad formats and video. Some progress is already being made: 56% of advertisers run cross-screen campaigns.

AOL's business outside its owned-and-operated properties continues to have the best growth. AOL Platforms revenue grew 21% year over year, mainly because of 19% growth in revenue among third-party properties. The rise in premium formats, especially video, drove that growth.

Facebook Content Partnership 'Interesting and Exciting'

Will AOL ever let Facebook host its content? The Huffington Post usually holds the title for being the most-shared publisher on Facebook, and half of its traffic comes from social, but Facebook reportedly wants to bring content onto its social platform instead of linking out to it. One investor wondered about AOL's position on the matter.

"High-quality content gets monetized multiple ways, and I see social networks as interesting and exciting partners for us in the future of monetization," Armstrong said. "I’d expect us to do more and more things with messaging and social platforms."

Doubling Down On Video

During AOL's NewFronts last week, AOL ringed up some sales, pre-selling select shows. The company is investing heavily in video production. Last year, it produced 80 pieces of original video content. This year, it's producing 3,600 pieces of original video content.

"Our top shows have 10-15 million viewers, which is tremendous given the size of online web video business," Armstrong said. One of the biggest successes is AOL Build, which racked up 50 million views in four months.

AOL benefits from a strong syndication network. One asset is Vidible, which AOL bought in December. It syndicates AOL content out to tens of thousands of publishers.

The publisher is reaching into linear content, too, with its NewFront announcement it will do joint programming with NBC Universal.

AOL.com, a video hub, grew 100% year over year and reels in 200 million video views a month. Armstrong said video views were responsible for the 45% increase in time spent on site.

Overall, video views grew 160% year over year, key as Armstrong moves AOL's strategic focus away from banner ads and "migrate[s] to the non-commoditized areas of the market."